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tv   C-SPAN Weekend  CSPAN  August 21, 2010 10:00am-2:00pm EDT

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the university of delaware. thank you for your time. guest: thank you. host: tomorrow, we will be joined by our guest from the central asia institute. we will have a discussion about the economic impact of the floods in pakistan. stephen kohn will discuss the role of whistle-blowers and efforts to reduce retaliation from employers. andbobby ghosh -- bobby ghosh will be on to discuss whether america it is islamicphobic. thank you. c-span3 [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010]
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>> up next, treasury secretary talks about thener future of housing finance. and then they will discuss the condition -- and then there will be a hearing on the discussion of the conditions of the nation's bridges. the obama administration gave congress a comprehensive proposal on the house of finance and urges action by january 2011. we begin with our treasury secretary. later we will hear from the hud secretary shaun donovan. this is about two hours.
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>> i will start with our panelists first. alex pollock has written extensively from a different perspective, i think, on these questions. ingrid is a professor at nyu and is the co-director for a firm. she has written extensively on urban growth issues.
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and then and bank of america is a major player in the mortgages of the united states. it accounts for 20% of the mortgages in the united states. and we will close with bill gross who runs pimco and has a substantial portfolio of mortgage-backed securities. we will ask each of the panelists in that order to speak for a couple of minutes. they will speak on it question, what would you change and what would you preserved? to keep it to a couple of minutes on what you are for and not against, you do not have to
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say you are in favor of a more stable housing finance system. you do not need to say that our system is broken or how it is broken. any to say what you are for in terms of change. with that encouragement and admonition, i will begin with susan. give us a quick prescription, and then we will debate about the choices that separate us. susan? >> to secretary donovan for convening this important discussion for the nation. it is inspiring to begin with a discussion that will be ongoing. you have asked me to focus on one or two changes and if there is anything vinny's to be done
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as we look at this framework for housing finance. timmy, the key information -- a lack of information, let me briefly point to the failure of the lack of information in this crisis. markets failed to price risk and control risk and recognize risk. we had several instruments that are complex and heterogeneous, and we must undo that going forward. we must do that with the level of transparency in standardization. correcting market failure and an affirmation will require disclosure, transparency and a and standardization. disclosure will not happen by itself. we need a mortgage underwriting
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and led all players in this. that is the critical piece of this, we need to have transparent information and data bases that investors and regulators can track in real time. i do think we should presume it securitized asiation. it has enough for a roast -- robust home ownership market for the united states. we have seen the failures that can come about with out regulation, and this must be undone going forward for the taxpayers, people on the risks. therefore we must go forward to minimize the tax payer risk. we must have better information,
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and that will assure ability going forward. >> banks. >> -- the banks. -- thanks >> [unintelligible] [laughter] if you want to elaborate further with more compliments, go ahead. >> i was like one quick addendum. the housing finance system needs to have countercyclical factors built into it, particularly in
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loan devaluations which moves in the opposite direction as inflating house prices and much bigger loan-loss reserves in good times to avoid the use reprocess which has bones and bubbles. we need a private secondary market where the bulk of mortgage loans, the financial system of the future should have withdrawn a large part of the sunset right asian in the market caused by the bulk of the activity. in these private secondary markets should handle the loans for the middle-class and upper- middle-class mortgages, which are the vast majority of the market. such a private market could include items said private rates.
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it could avoid the subsidies of the market which drives up house prices and makes them less affordable. third, we should have no gics. you can either be a private company or government agency. one or the other, but not both. i think most everyone agrees with this. which is right. mike agency is both are right. fannie and freddie should turn into a private company. part of it should turn into the government's operation providing subsidies and non market transactions. subject to the normal government disciplines of appropriations
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and oversight. the third part is the liquidating trust to run of the remaining government guaranteed the debt with a significant loss of the tax payers. this could be with the privatization of sallie mae. i call this the julius caesar strategy. we divide fannie mae and freddie mac into three parts. my addendum is that should it survive, we must make sure that the double leveraging is fixed. banks had special regulatory encouragements to zero preferred stock index to fannie and freddie.
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it ran up the leverage the biggest fault of the system was excessive leverage. we need to eliminate disability by using the banks to finance should that forms arrived. thank you. >> thanks, alex. ingrid? >> i want to focus this on one point which is the nature of the federal guarantee. i have been grappling with this. we have come to the conclusion that carefully designed government guarantee is critical in maintaining and creating a stable liquid system
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that provides safe financing for borrowers. that said, guarantees are tricky business. it is clear that the implicit guarantee provided by the government in the past encouraged excessive risk- taking and overbuilding of the portfolio. how to do this careful design of the guarantee? that is the challenge. we want liquidity maintained and the moral hazard and taxpayer risk are minimized. we could spend all morning talking about that issue. i want to present four ideas that that guarantee could be structured to minimize the risk to taxpayers. you want to limit the scope of the guarantee. i see no policy reason that it
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should be provided for all of the corporate debt of the entities as it was in the past. going forward we should limit the guarantees to mortgage- backed securities themselves. second, any guarantee should be explicit and the government should charge a fee to cover potential losses and to offset neutralize the budgetary impact. third, the government should place limits on the type of mortgages that can go into securities. it may ltd. those mortgages that can go into fixed securities to claim the mortgages that are the safest and most easily understood and that are underwritten according to
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specify the guidelines. four, the guarantee should only kick in to cover catastrophic losses. this may be the most important and difficult point. even then, the reserve fund could be exhausted. private market ensures securitized there's would cover the first losses. all of their capital would be at risk. you might even acquire the that they're being private mortgage- backed securities standard in front of the guarantee bonds to provide this. even with those changes to the guarantee, it still is an important role for regulation. i think that it needs to cover
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not only the future gse's but all mortgage origination channels to prevent the kind of forum shopping that we had in the past that exacerbated this crisis. thanks. >> mark? >> good morning. the first thing i would change is cut should move into this building. --hud should move into this building. [laughter] it is great to see you working together in to see hud and the treasury in the same room. i have a five key points.
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first, i believe that we should as a partner keep expanding and strengthening the community reinvestment act. strengthen our commitment to affordable housing, because currently it is inadequate. and not allow this discussion to be governed by the undertow and undertone of the weapons of mass deceptions. some have a commitment to affordable housing, to lending to communities of color, a commitment to the community reinvestment act cause this meltdown. it is not true. it is not supported by data. i think as we go forward, there should be a commitment not to allow that to in fact this very
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important issue facing this nation. 3, i think we must preserve a dynamic role for both the government and the private sector. it is not acceptable in the 21st century america for something so critical, the largest expenditure for most americans, a key component the decision making to be concentrated exclusively in the private sector or the public sector. the tension, the dynamic role of both not only engenders public trust. it is the way we have to do business in 21st century america. the market as it exists today is not what adam smith had in mind. it is quite different. power is more concentrated.
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we need a dynamic role. the backdrop of this is that for a long time, the gse's did right by this nation by creating a middle class and helping people become homeowners for the first time. back in the 1920's and 30's, if you wanted to be a home buyer, you had to have 100% cash or put 50% down. that is not what we want in the 21st century america. four, any discussion about what we do has to weigh the impact of decisionmaking and the structure on main street america and don baxter america. there has to be an analysis which looks at how we structure
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the financial markets and how it will impact consumers, communities, cities, and people who are going to be affected by this decision making. it is so critical, because now we have wall street and main street and back streets, the people that have been pushed down because of the recession in crisis, who had bad credit and struggling to get their lives back together. helping them get their lives back together is essential to the future of the american economy. fifthly, we learned from that homebuyer education works. that where people are informed and educated, where they understand their risks, sometimes they walk away with the decision to become a home buyer.
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sometimes they walk away from a product that is beyond their ability to pay. any system going forward pass to look at the structure of demand in size from the equation. that means counseling in homebuyer education. that should be preferred, may be mandatory. it should be a must. we have to look at some sort of system to help people clear their credit records. help them turn the corner and move forward. this discussion is important. it is meaningful. it has to be a broad discussion. it has to look at supply and demand. it has to look at wall street and main street and back street. if you could design a system that services a limited number of americans comparable to wall street, but does not do the country justice in terms of
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housing the nation. the final thing is we should as a part of this look at what the housing needs of the nation are over the next 10, 20, 30 years. how many housing units do we need? how many affordable housing units do we need? we need a projection. we need to know what our objectives and goals are if we are to intelligently designed a system. this is a chance for recess for our generation. it is a chance to rebuild the economy for the 21st century. we do not want to build it the way it was before. we do not want to throw away the things that may have worked in the 20th-century. we want to learn the lessons of the past, not throw the baby out with the bathwater.
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fix what is broken, but also utilize those things that may have worked. that requires something we do not like to do. we need to look historically at how we got to where we are, and this is crucial to this nation and to eliminating the wealth gap. i am glad to be a part of this discussion. i look forward to more. thank you. >> thank you, marc. we end with a banker and investor. >> we appreciate the remarks and the counseling to take a gradual and delivered approach to support the recovery. we do have a system going forward. we are in support of the government's role to stay true to the mission and have liquidity.
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we have to retain this structure and preserve it. i would like to outline changes for the future role of the government to be transparent unclear. institutions or products must be explicitly guaranteed or not guaranteed at all. there is no long term need for the g a p to hold mortgages or mortgage-backed securities. their mandate should be to provide mortgage guarantees to the marketplace and consistent underwriting standards must be clearly defined. going forward, we believe responsible lending is important, the greater transparency, and cardiff for consumers and a level playing field for all of the participants. thank you.
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>> thanks. >> good morning. let me say first of all, i hope my remarks will represent public not private interests. this is washington's they. tomorrow it will be another day. i want to support the emphasis on rental housing. we need to recognize that for decades, america has had too many homes. housing is part of the bigger challenge. policymakers must have been shipped -- shift.
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i think rental housing plays an important part. pimco abdicates 100% financing. -- advocates 100% financing. [unintelligible] i think we should consolidate all of them into one agency. there are public and private models currently being considered.
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the result in higher mortgage rates and cater to wall street as opposed to main street. many has the potential to replicate the abuses of the past. private mortgage insurance is untrustworthy. we need one national agency with sufficient backing in guarantees going forward. this concept is crucial to the liquidity and the cost of financing it. the old demint liquidity provider and lowest cost provider. we must have a 30% down payment. new housing or secondary market. without government guarantees,
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it would be hundreds of based points higher. let me suggest that policymakers should quickly engineer a refinancing opportunity for all of those mortgages that are included in these securitized mortgages. it affects stimulus. it will go to a snail's pace incapable of providing efficient job growth. unemployment rates could be made at double-digit rates unless we have a positive stimulus provided in the next six months. home financing, you take a 7%
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mortgages and tournament to 4% mortgages. you provide stimulus of $60 billion in consumption as well as a potential list. afford to the discussion. >> thanks. i want to start by talking more about this basic question about what role for the government in providing guarantees or forms of guarantees and talking about the case for and against it. i want to start by asking alex to be more explicit about what role he would presume -- preserved. dimension substantially reducing the scale provided.
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it sounds like you want to retain some form of support. why don't you say more about what you would retain and how you would design it. >> since we talked about the guarantees so much, this is a burst in the book of proverbs that addresses guarantees. he who stands as shortie for the all s of another shel [unintelligible] for it. [laughter] my notion is the bulk of the mortgages -- we used to think about 7% of the mortgage, and still would be in a market should be private. the way we get there is to start ratcheting down the limits for
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all of the government guarantees for fanny, fredi, fha, -- fannie and freddie, fha. their maximum is based on the median heights -- house price in the area. it would operate in the bottom have of the market and not the top. i would go further than that. there is a role for government programs. fha since 1934. it would stay as it is and jenny mae played a huge role in the market as it is today. wasit became a securitized arr
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very effective. fannie mae and freddie mac would have similar programs, which i define as subsidy programs, which is the same as in nonmarket transaction. it would move and become a part of the fha complex and be handled by the congressional oversight in the same way they are. >> so you would retain a role for the government and provide a guarantee for a set of conforming mortgage products, but he would limit the extent of those by setting a price limit
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and a median house price by region. >> in the far future there were a pinel gse's -- there would be no gse's . >> fha would do what? >> i said they had bet -- been here since 1934. it would focus as it needs to on the soundness of its mutual portfolio. and they may try to get them financial statements that people could understand. i was just that as a good project. >> ok. do you want to add anything to
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this debate? >> i think there needs to be a continuation of fha as we just discussed. in a going forward to have the role of the federal government not only there but also all mortgages in terms of catastrophic risk. as the secretary said, in a recession, the government will step in, otherwise this nation will become a depression. the government will step in to ensure we have reasonable rate. so the government must actually oversee the risks that the government bonds. i think with wet ingrid said,wh
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theawhat ingrid said, government could be very limited. outside the government, in a limited role for a government guarantee with private capital in the first loss position. private and public entities are needed. private capital. in an 82 guaranteed debt, only -- over time, this should be smaller relative to the transition. that would be a private non government guarantee. , but this in the end, the
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government framework to ensure that even the private sector does not take risk, replicated the abuses of the past through information that allows investors and regulators to monitor the market. >> thanks. speak to what separates you and your vision of the guarantee framework for the government's from what bill gross and alex laid out? >> there is some commonality. i agree we want to ratchet down public involvement and the limits on the government
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program. i do not know what share of the market that it could cover. we agree there is an important role for fha. this market would cover the mortgages not the very high end , but they could choose to go to the private sector and fall. >> part of the debate goes to what would the guarantee cover and how it would be extended. have you limit the scope and
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eligibility. you -- how do you limit the scope and eligibility? mortgages that have a higher down payments, lower home value , why don't we keep going around this table any speak more in detail to what you would extend or design a new guaranteed to cover. >> i think in listening to the discussion about the guarantee, the first question i would have is what impact does the design of the guarantee have on the objective of improving and increasing the flow of credit and home ownership in the country? if it simply becomes a philosophical conversation about i prefer a market-based purses
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government, and we do not carefully do the analysis of what impact it will have, then we risk designing a system that is going to break or be inadequate. thinking about doing the chance to do policy right, which is looking at options and alternatives and working through scenarios. i would ask the financial- services industry. , what had alex's version would it do to your decision making? the home builder community, ask them the same thing. i would want a system where home ownership is available to a few.
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where only some americans could afford. we should subsidize and do cert 8 and low income housing tax credits. we create a broad system where most americans are. there has to be an affirmation on what we are able to do with home ownership in the 20th- century is help create equity to put people through college and help people start small businesses and create equity that people passed on to the next generation and create wealth, so there has that to be an analysis versus the designs of what we might look for. i think the objective ought to be making credit available to broad segments of the american
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population on fair terms and retain a stable housing market. i believe that has to be part of this. all of the panelists who have studied this, what is going to be the impact if you design a guarantee as you suggest? take me through the analysis in terms of what it will mean for the flow of credit and underwriting and sustainability of neighborhoods that have been left out. that is an important component of anything we discussed. >> are you giving us the sensible admonition of not over correcting and going too far on what has been important and good and well?
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what about preserving a strong ongoing role for the fha in providing relatively generous financing to americans who want to buy a house of more modest size? >> that is a possibility. it has to be looked at. one of the proposals that is floating around with multiple guarantees is so that it is -- you hear arguments of single guarantees and multiple methodologies. if the guarantee is positioned in a single place, they will have great influence over underwriting and product design.
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there may be some good sizing where fha would require or support affordability. there could be benefits to that. it also centralizes control of power. that is a very important aspect of risk and how we set this thing up. everybody would basically be trying to influence them or do business with them if they are going to be in the housing market. that is another conversation. the common sense is take analyze the impact it would have on private decision making and the floor -- flow of capital. i do not want to be close minded about any specific model, but
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with a desire to make sure main street and back streets are firmed and have a long-term sustainability and not get dragged into so many philosophical discussions and we never ask what happens when the other shoe drops. >> what do you feel about what would be appropriate in designing a system to me your tests in the beginning? that is without rick -- recreating some of the problems we saw in the models? >> staying true to the mission is what we were talking about. we can provide that capability.
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that entity should be retained with the focus of a different miss of alternate rental opportunities versus the secondary market and liquidity, there has to be a robust secondary market providing that liquidity. i think the balance sheet should be kept in that spirit. private sector securitized asian is really dependent on the consistency and the clarity of the underwriting standards and all of the things that we must take into consideration in terms of down payment and standardization and a level playing field needs to be taken into consideration.
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i believe we can get their if we stay true to the mission of affordable lending. >> was to be the extent in limits? >> it is an $11 trillion mortgage market. the other half is finance, where people did not think housing could go down. to suggest there is a large
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place for private financing in the future is unrealistic. we have been dealt a significant blow. the only way to bring housing back and create vigorous mortgage finance going forward is to provide a government guarantee. what would that provided? principal and interest. it would be provided for by adequate insurance, sufficient down payment, and encompassing a regulatory environment that provides adequate supervision for any mortgage going forward. it would incorporate the necessity in terms of the fha
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for lower down payments and requirements in terms of meeting the mortgage. the government, and i say this unfortunately, in terms of the mortgage market, we need the government balance sheet. the private market come back in and take the place and do what it has done over the past 30 years is impractical and will not work. >> i thought you might like to respond to that, alex. >> on guarantees and the price of guarantees, none of these should be thought of as constant rules. it should be seen as looking at
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the price of houses. i have generalized this. anytime assets are financed, the means have to be responsive to the level of the asset price. when that price takes off, all of these things, guarantees, a down payment, financing structures have to be responding in growing more conservative as the asset price grows more optimistic. if we do not do that, it may not matter what else we do will be back in this same problem again. >> i was going to come to that basic question. loan to value ratios, the amount of down payment you have to
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provide to be eligible for a government guarantee should vary over time. it is surprising to hear that from you, because it does envision a world in which we are relying on the use of discretion by people in .ashington in the government's policy makers to act with foresight and wisdom to tighten things up where they get away from us. i was surprised to hear you say that, because you come from a tradition of more skepticism. the rest know what's of view if you would -- in terms of what qualifies for a new
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controlling mortgage in this brave new world, would you want to have underwriting standards in terms of these hills down payment over the cycle? reserving -- what about this basic question of designing a system where there is countercyclical underwriting standards? anyone else want to speak to that? >> i think they have some merits. it would be difficult to enforce the down payment. few are created. there must be some countercyclical alidade in terms -- , sequoyah countercyclicalin terms of the amount.
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>> it is asking a lot of the regulators and the market where housing prices are increasing and there are issues of affordability to raise the standards. the special at that point where the private sector will be allowed to lower them. that is what they will do, because they will be viewed as the market for housing prices are increasing in collateral is increasing. from my perspective, even keeping the rules so that they are not process a couple -- pro cyclical, so that we have standards maintained is important. >> you look like you want to weigh in on this. >> i will just say that there was the interpretation of
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politics. the very fact that markets, both regulatory systems and markets oom -- ght up in the bloo everybody makes the same cognitive mistakes. that is why we want these countercyclical elements. i do not view this as a regulatory or government discretion. i view everybody's foresight of the future as a limited and prone to failure. for that reason, i would like to see the standards. how do you define a prime loan? work with the devilish and -- definition of what is as a prime loan.
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a prime loan would have to have a one-page mortgage information form in order to be prime. >> is that the only loan that can be securitized? >> no, i am just giving an example of how you may build standards -- industry standards are very common in the world. you might do it through defining it. >> what is to stop over time n e from taking more risk into the system? >> i am using my time. [laughter] that -- you do
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>> the securitized loans in the area would rise in yield and defect participation. that is a market based investor. >> that is in theory. >> lenders extend beyond one or two years going forward. [unintelligible] >> the government guarantors' are also affected. >> we agree there is much chastening. [laughter] >> i want to see if we can sharpen the distinction. there is quite a bit of a consensus across this group at least on the broad elements of defining a successful regime.
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in your vision of a new realism, shares that the government press is providing support through guarantees capture a larger share of the market than the alternative from alex. the government's role would be -- realistically you were saying it would have to be larger than 30%? >> it is 95% now. it is trying to bridge between now and the future. you are looking at this particular commission and recognize that we go back to the old days where securitized loans or covered bonds are adequately covered, that is not realistic.
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if we are speaking to the liquidity of the future of originations and the cost -- we can go private, it is a 300-400 basis point cost. is that the type of market we want going forward? it excludes almost every new homeowner in america. recognizing but it is a necessity in this day and age that we replace the private market balance sheet with the government's balance sheet. >> thanks. on this basic question, you want the guarantee only to cover catastrophic losses.
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the lever is more of what they would do. i am focusing on this, because i know we will have a chance to talk about this in the next session. in the breakout sessions we will do this in more detail. but this is going to be the hardest to get right. we have to be focused on what incentives it creates and what it does to access housing finance, not just in the boom but in the financial downturn. how would you change the design in structure? >> one of the most challenging and difficult elements of redesign is -- i do not have all the answers, but i reiterate i
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think the guarantee, even a very limited guarantee that covers catastrophic losses could survive the kind of liquidity that we have been talking about. it is so important. it is imperative to design a guarantee to make sure the private sector is taking the first losses and the guarantee would only kick in to cover those catastrophic events, only after the reserve fund is exhausted. i think there are a variety of ways of doing that. it could be through equity or private mortgage-backed securities to stand in the front of the guaranteed debt as well. i think that is a critical point. the whole issue is about balancing liquidity on one hand
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but also protecting taxpayers on the other. striking that balance and reserving the government role to come in the event of these catastrophic losses could be there. >> thanks to all of you. you were substantive and thoughtful and came with convictions. an excellent job. i appreciate you very much. now we will have the second panel. thank you very much. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] [unintelligible] >> thank
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we will of the said to be little been more of a back-and-forth. we are very lucky to have, as you will hear, and an enormous the broad set of views and perspectives with a lot of historical vantage points. i want to start and really focus on the historical lessons and broaden it out to try and connect discussion today as the sign behind me says to the future of housing finance. these are enormously important and they are only one piece with
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a range of other ways the government intervenes. and how these pieces fit together and how can we think about these goals? first, we will hear from the chief economist of moody's analytics. they are a leading provider of research tools. i would say he is a leading voice that many people in the country look to on the future of our economy more broadly as it relates to housing. next we have the co-president of wells fargo home mortgage. one of the most important players in our mortgage market today. then we will hear from the chairman and president of his own company. his biography in your package, he is a father of the securitized mortgage market. would you agree with that darks
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-- with that? [laughter] next the chief executive officer of radium group being cut, think -- radium group inc and one of the biggest private mortgage insurers in the nation today. if she brings a broad range of experience. she was the director of the treasury's office of the thrift supervision as well as a director of the fdic and chairman of the board of the reinvestment corp.. finally, the director of policy and housing for the program on him in and community development at the john d. and catherine macarthur foundation.
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but as a professor of public policy planning in the university of north carolina, the chairman of the department of public policy, and the founder of their training for capitalism. let me start with you. we had a discussion earlier about what the of success our role should look like. -- successor role should look like. we have seen enormous invasion originally this counter-cyclical role-playing through this. debate on whether guaranteeing this should be. in some cases expanded.
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given the history of the watched as an observer of the economy, what would you say about what that role ought to look like, the transition issues, and other difficult issues we will talk about. what should that will look like for the federal government? >> at that you're going to ask me if the phillies were going to win the world series or not? that is an easier question to answer. let me make two points. first, the government should continue to play a very large role in the housing market. that fundamentally involves two things. first, harkening back to the first panel, i think it is clear that the government needs to provide a significant financial backstop to the housing and mortgage market. the government's entry into the
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housing market after the great depression was motivated by that very fact. the government was not there. because of the collapse of the housing market, millions of people lost their homes as a result. government entered in to provide that financial backstop. i think that is key. clearly, the necessity of that is evident in recent events in the great recession. i think it is clear that if the fha in a particular had not stepped in to the degree that it had that the housing crash and recession would have been immeasurably worse. as it was, it was serious. house prices are down 30% from their peak corp. for years ago. -- from their peak four years ago. the foreclosures that hit the economy would have been measurably greater without the ability of the fha getting into
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the market. now, the government is 50% of the purchase market. there's fundamentally two things that the government should do in its role. the second is that it has to provide our access to affordable housing. that is key. particularly to low-income households. i think that will be more important going forward because low-income households are, frankly, under more financial stress than they have never been and that will not change. it will probably get worse going forward. they will not have access to housing which is not a luxury, it is a necessity, without government help. this does not mean necessarily a single-family home. idec we have not paid close enough attention to rental housing and the advantages of that. not everyone can or should own a family home. i think the government should think more clearly about how they can help with respect to rental housing.
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the first point is broadly the government needs to play a large role going forward. now to point two, the government role in housing needs to be pulled back quite significantly, certainly compared to where it is today, but also compare to where it was prior to the crisis. he i'm not arguing this year or the next. the boy is still quite large in the private market. the private market can i step in if the government steps out. we are not done. the crisis is still ongoing. i mention that house prices are down 30%. we will see more price declines. will rise significantly. that is a key statistic.
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when housing values are falling, nothing really works well. it affects their willingness and ability to spend. it affects the ability to get a loan and got to hire. when i got my first business loans in the early 1990's. i put up my own collateral. it is not over. in the long run, it is important for the government to reduce their place in the housing market. it is, in my view, over subsidized. it is quite substantial and we are not getting our money's worth. the homeownership rate. in the u.s. is no higher than similar countries like the u.k.,
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canada, australia, and their subsidy is measurably lower than our own. we are not getting our money's worth. second, as bill gross was suggesting, we are redirecting valuable resources and it is not going to other areas of the economy where it could be more productive like technology and education. finally, frankly we cannot afford it. we have a huge fiscal problems. if we're going to address this, we will have to scale back the subsidy we provide to the housing market. no industry will benefit more than housing if we do successfully address the fiscal problems. if we do not come interest rates will rise. the housing market will suffer. it is key for us to scale back that we bordelais provide housing. -- broadly provide to housing.
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>> had a front-row seat before the crisis and through the crisis in making mortgages, the effects of that in communities, obviously for your business. give us a sense, now with the the benefit of hindsight, how you would perhaps change policy to avoid the kind of crisis we just went through? >> history can be a very useful guide. if you think about some of the market disciplines that are once again becoming the norm, there is a good solid base of knowledge to draw on. there are four key policy areas the required.
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lenders need to have an interest in the underlying quality of every single mortgage that they may, not just origination but throughout the entire life of the mortgage loan. we need to look at all aspects of the business model that make the loan walk away. in terms of how to do that, in regards, the qualified [inaudible] it will go a long way toward making this happen. their knees to be a level playing field for all parties across the entire mortgage business whether you are involved in securitized in research -- secured rising or servicing mortgage loans. even more important than the
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regulation itself is to make sure we're consistent in the rules for all market participants. loan origination should not be able to escape market scrutiny or in areas where regulators do not have the caliber of resource needed to do the job effectively. absent these kind of changes as this has all too often shown, this will flow to the lot -- lowest common denominator. the roles and responsibilities of all the various people involved need to be very clearly involved and very well understood brought renewed her life of the loan. -- understood throughout the entire life of the loan. the need to have the ability to act without the threat of litigation.
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there needs to be greater clarity around underwriting authority that occurs as the securitization progress and the potential exposures must be clearly understood. if not, when things go bad the various parties involved, including the government, will need to forge solutions on the fly just as we have had to do during this recent crisis. finally, any government guarantee made available to their success sores should be very explicit. -- made to their successors should be explicit. given the size and the unique nature of the use -- of the u.s. housing market, the use of capital is essential, but we also believe an explicit government guarantee will be required to ensure there is a reliable flow of mortgage credit across the range of will
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experience in the future. to be clear i want to emphasize the guarantee itself should only apply to the performance of the mortgage securities it sells. and should not apply in any shape or form to the particular entity involved in the securitization progress. a worker before certain subsets, we believe the government should provide financing subsidies or direct credit risk based on very deliberate and a very transparent policy choices. in one of the major policy challenges that is in front of all loss is to how best to marry together the government guarantee with the maximum use of private capital in the way that minimizes the risk to the taxpayer has come encourages competition, and insures that one institution is not too big to fail. one of your comment letters received is from wells fargo. we laid out what we think is the framework to move the discussion forward in a very constructive way. there are many opinions on this
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topic with a wide range of ideas. we have to get this price. it is too critical to the future. thank you and i look forward to the discussion. >> lou, with the unique thinking that you have with the securitization market and the role of these in the market, give us the sense of what you think the key moment or moments were were these got off track? it led us to the class where they are today? >> i would be happy to do that. i feel like marc anthony presiding over cesar's funeral. i think it is important to know what it was they were supposed to do and did. i can do this very quickly. the market i came to in the 70's no, i was not there in
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1936. it has been a pretty tough time, but i am not that old. when i came to this market in the 1970 proxy, the would-be homeowners faced significant regional pricing differences. secondary cities and small communities did not have access to 30-year loans at fair prices. there was little standardization regardless of how the early agencies, in their early form, tried which was true for underwriting appraisal and documentation. the most important contribution was to standardize mortgage or eight -- mortgage origination. they created a large liquid and efficient market. they allowed equal access and lower rates. they determine the level of acceptable credit risks. you could not get anything done
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without agency underwriting and agency standards, even if it was not going to the gse's. you could not create one that was not agency standard. for three decades, the agencies did their jobs. they provided with the charter required. they provided access. they provided standardization for everyone. they provided liquidity. from the beginning, there was a critical flaw. the secretary mentioned it. the implicit government guarantee. this did work for the success of the enterprise. it gave them the force that they brought to bear to create the modern market. since the government guarantee was provided essentially free, and frankly with less oversight
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that might have been imagined, the moral hazard was always there. we talk about it frequently, not just recently. the privatization of profits and the socialization of risk. the answer to the question, i believe, is in 2002. dain non-agency market which started to mess with sub-prime loans. we made them for 35 years. the fha has a brilliant history of doing this. we started craig -- started creating new loans. we altered this. we developed new uses for so- called piggyback mortgages. the private-label market began challenging the norms for underwriting, appraisal, and down payment. as each and every for ray met with success, it was still rated
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aaa and it was still oversubscribed. we kept pushing the envelope further and further. they kept losing more and more share of the market. the inherent weakness in the structure came alive. the agencies were approached by a need for earnings. i agree with mark. sometimes people say a need to expand homeownership, that is true, but i think it was much more a profit motive than any political motive to expand homeownership. they lowered their standards. to further exacerbate this and to further betray their mission, they bought over $500 million of the very one that created the problem. fannie and freddie created but they were permitted to provide. we are where we are. i would also tell you that the chris dodd-barney frank's bill addresses many of these issues. there are new rules for the
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ratings service, transparency, capital, regulations enforced. we have always had regulations. part of this are the ones that have never really been in force. when the bill does not deal with and i think we need to deal with is the second mortgage issue. the bill is silent on a second mortgage. if we did not resolve the second mortgage, we have not resolve the excess leverage issue. in the end, this was built on a homeless shelter, not a revolving credit accounts. looking to the future, i know alex will probably be upset at this, but i think we should remember that at one. freddie mac was part of the home loan banking system. we should think about the structure in terms of going forward. i think we have to be very careful in building this new system. we need to remember and still
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provide access and standardization. we need to ask ourselves, can handful of giant institutions regardless of their merit do with those two agencies were able to do and only fail when the achilles heel figures who will in effect behave differently than two agencies which at least ostensibly used to say they are public service entities. i'm not throwing rocks at any public entity. >> thank you. to build on that, you talked about what dodd-frank could accomplish and the need of for
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risk management. there has been discussion about the systemic risk issues. there has been discussion and we are clearly moving towards more careful risk-management on an institutional basis. the balance that, how do we ensure that we have responsible innovation in this system? how do we make sure that we do not lose the benefit of the entrepreneurial spirit in terms of inventing and continuing to involve a market in a way that benefits consumers about protecting them against the excesses'? >> innovation itself is usually a good thing. it has been one of the hallmarks of the american success stories. previously unmet needs, reduced
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costs, and created better risk management tools. they stressed these to far beyond their purposes as they began [inaudible] two examples come to mind. the first is a product or the few good borrowers who could not meet conventional credit standards. these credit blemishes were compensated by other strong factors such as a large down payment and a solid appraisal.
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these are without any strong compensating factors. the next example, and lou referred to this also, word these loans which for help other was good borrowers to get around the 20% down payment requirement. they initially worked well for the tiny nation -- niche for which they were designed. as the secondary market started buying these loans and began treating the first loans as lower risk than those actually put down 20%, without requiring, these went beyond sound underwriting to bet on home price appreciation. hopefully, the accompanying
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consumer financial protections along with the the increased emphasis on managing systemic risk at the institutional level will lead the way forward. let me focus on how do we then incentivize innovation? first, i think the marketplace and the nature should [inaudible] akko important is to arm iraq and innovation with the right kind of checks and balances. i am speaking of the benefit of my share of both failures and successes. to achieve this, i think we need to think about the following. first, a governance and regulatory framework that scrutinizes and monitor's new
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products more rigorously, recognizes unproven risk worth it -- more explicitly, and treats them different. prudent limits of exposure to new types of risk as well as higher capital allocations consistent with the uncertainty inherent even in the best and the most well-intentioned analytical tools and models. when i look back in most instances, i see the magnitude of accumulation to exposure to new products more so than the introduction of the new products themselves. third, rewards for innovation that are stretched out over the life of the risks of their is an opportunity to reap handsome rewards but only based on actual performance. this is a good idea not only for new products but potentially for all risk activity. i would like to share something. our short-term incentive program is now a medium-term program
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with half of the payment delayed by one year and pay down based on the actual credit performance. credit factors are also now more explicitly factored into our long-term incentives. the goal is to shift compensation over an extended term and to factor in the credit performance in the award year over a longer period. finally, risk mechanisms that results in more scan in the game as well as achieve the benefits of checks and balances through risk sharing. often indirect risk by other sophisticated parties to share the risk and defuses of this can be some effect -- can be as effective as it risk [no audio] -- [inaudible] the challenge for the future
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housing finance system is to enable a innovation while avoiding big mistakes. the art of progress is to reserve order. innovation can only work this -- if it is on top of a stable system and the availability of a liquid market of conventional loans even during a time of destruction in the private securitization. but these require both private and public sectors working together. public bridges a patient should be limited to writing on a layer of guarantee. private insurance and reserve capital at whatever future entities which is a limited role. public for dissipation can be paid for through fees to further protect taxpayers their sound
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underwriting in appraisals will additionally limiting the government's guarantees to pay starkly sifter -- to aim sector. i recognize the need for borrowers to put less for a down payment, but i would say private capital, has thrived on meeting the needs of borrowers in putting down substantially and lower than what the government agencies required. the fha has a continued role in meeting the needs of borrowers who are prepared and capable of becoming home owners in that manner. lastly, i would like to close by saying that there's no perfect solution. there was a surplus in the garden of eden. -- there was a servant -- serpent. we have to look out and make sure they do not get that big. >> let me turn to you. you spent a lot of your career
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working on innovation, particularly as it relates to underserved borrowers and communities. i wonder if you could give us a sense of your thinking about whether, in fact, we should continue to try to target the underserved populations? if the answer is yes, how exactly do we do that? >> let me rattle off some statistics. with house prices lower than they have been in years, the federal support for housing, we have 18.6 million households, 60% of households, spending more than half of their income on housing which includes one in the four renters and one in the eight owners and that was in 2008. it is undoubtedly worse now given the unemployment situation.
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only about 25% of renters get it. of 28 states including the district, more than two minimum- wage jobs are needed to rent a two bedroom apartment at the fair market rent. there has been widespread devastation in the owner occupied rental market which has badly and structured loans. house price declines have generated record levels of foreclosures. as bad as the situations are in donnell, they are significantly worse -- in general, there are significantly worse in low- income communities. federal government has a lot of ways to perform his role -- direct action but we also have guarantees, tax credits and deductions, and i know michael talk a little bit about everyone's favre deduction. support for entities such as community development that effectively leverage and are
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occupied houses and regulatory content. i do not think you can leave this to the fha alone. i believe because of all the calls we have had here for a level playing field that inherently suggests we're not talking about the fha loan. what kind of support is needed. with respect to home ownership, in the current situation in which 95% our government related, this is demonstrating more than any study possibly could that the private sector will not do it on its own in tough times. i think we should stop having that debate. there is virtually no mortgage finance now rallying lower income communities or communities of color. this suggests, interestingly, of that it is necessary. it has to be the right kind of support directed in the right
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kinds of ways. the extremely well for reforms in the dodd-frank bill may exacerbate the problem. because they are raiding the ugly lungs from the capitalized institutions that supported the market until 2007, we have to pay better attention to access to credit. it will be good credit, but as several of the early panelists pointed out, it is expensive credit and we will kill the system that we want to protect. finally, the long term fixed rate mortgage which has been the basis for wealth accumulation need support from the federal government in order to be available at anything approaching a reasonable spread.
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as secretary geithner mentioned, the experience of other countries, i think we have to realize is that in other countries that have done without as much seemingly over government support as we have now, the underwriting standards set by the government for all mortgages are much more conservative doubt -- and we have in this country. there is enormous career support for rental housing that we do not have. i said that variations on both of those themes are important. that is not the direction this country wants to go in as a permanent matter. with respect to rental housing, which i think we need to pay attention to, it houses more than one-third of all americans. fannie and freddie support has been absolutely critical in large multifamily markets. >> low-income housing tax
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credits. >> more of the subsidy will probably go to rehab and protecting existing subsidize properties which is harder to do, not easier. secondly, and sufficient financing for small housing renter -- rental structures. they contain about 80% of subsidized rental housing. note which was once the province of the savings and loan industry. when they went under, basically for the province of no one, and unless we really pay attention to it, we will lose it large amounts of incredibly important housing stock. i will not talk about guarantees because people have talked about the idea -- already. i will talk about context.
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i will talk about what is needed to enhance and indeed bring back access to affordable housing in the underserved markets. the community reinvestment act serves its purpose. and is very encouraging that they're working. i testified to make it work better. one element of making it work better the regulators cannot do is that the primary market will not originate certain kinds of loans that they are -- that they think they are risky to arm. this is a problem with multifamily housing rico -- multifamily housing.
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to make is applicable for the second market system, does it work? many reasons are being explored by the regulators. cra is primarily geography based. the incentive enforcement structure relating to mergers and acquisitions and is positively uses. they have control over where they will operate. i think the duty as a major it manages. reticulate for any entity taking advantage of a guaranteed, either a sponsor or issuer. it has the ability for them to
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modify. it is in the statute and the proposed reg includes small -- manufactured housing preservation. it is flexible. it bounces the obligation to serve the under certain markets and provides an outlet. this leads to the concept that for categories of loans have a public purpose, a useful measures to make sure the secondary market mirrors the primary and rather than ignoring the critical segment. it has the ability to force public plans, opportunity to comment, data, accountability to me the plan. it provides support for innovation, as i talk about, which can promote safe crossing and enhance affordability. i think they need to be financial as low as regulatory support.
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this can be research and development for that will serve the of market or credit enhancement for times in smaller markets. this really can work. you're not the national security crowd, but my husband is part of that. barbara -- darva has been around for years. innovations want to buy the government, if done well, can really have a tremendous impact. the mortgage securitization market, as a lot of people have pointed out, is enormous. a small fee on each issuance can find such a fund. mullaly the housing trust fund which will be funded by fannie and freddie airline ticket fees and the telecommunications school and library school charges. this is not a new idea i think
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the federal government needs to help the secondary market meet a bill for the under serb population. it has lots of tools available. >> thank you. mike, let me come to you to give you more space to work. we heard a broad range of issues raised here that touched summit of raising the federal government can interact. what are we missing? what has not been said that needs to be said about the role of federer and in the broader housing policy? >> as a look or restored art of federal housing policy and its relationship to housing finance, i think the housing finance system has become are particularly over the last 15, 20, 25 years, and much more
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shaper of housing policy than it was in the past. this is especially true for rental housing. i will need to elaborate on that a little more later. while this is not good or bad percent, it is a reality that must be recognized going forward because it is not without. we've gone from financing low- income rental housing largely through federally guaranteed bonds, direct loans at below market interest rates to a system of clearing ready of rental subsidies that counter spending programs and tax credits on to market rate debt. any changes in the housing finance system more secondary markets that fail to take these
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realities of the interdependence see of housing policy goals and the needs of capital markets and finance could easily have the real --derail critically important assisted housing programs power -- early rental housing programs. just a small example of this issue. in the multifamily sector that are performed the broader commercial mortgage-backed securities market. defaults and delinquencies are lower. the reality is that because of the customized needs of various kinds of metal housing
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investors, a substantial amount of the paper is held in portfolios. there seems to be a broad sense, not in mortgage-backed securities, but there seems to be a growing sense that going forward even if we do a problem, we do not need portfolio investment that challenges how you redress the intricate needs of affordable multifamily rental housing investors in the various sectors of the market, preservation as well as new construction, in a standardized way of were the securities could rapid currency around long-term, stable, affordable in multifamily that. another thing to point out is
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now so much of the challenges that we face in the assisted housing sector were really the causes of earlier policy decisions. literally, federal policy created the need for rental housing preservation by making a deal with private investors that if we could charge them into the sector which would allow them to prepay their mortgages early, to take advantage are rising market opportunities in places where they develop housing. some of our most desirable, affordable rental housing is dropping out of the system. we need to make sure by going forward the secondary market and the housing finance system will recognize the needed to secure and preserve this housing.
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it is vital to low-income citizens. i was not sure i was going to say anything about a bus, -- anything about this, but market and others on the first panel, they really address this tangentially, but we can rebalance national housing policies and reform the sali secondary market without explicitly addressing the market distortions caused by the ofernment's disproportionate owning over renting. what form ultimately these take, who knows? according to cbo, the federal government spends about $4 supporting homeowners for everyone dollar it invests in
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low-income rental housing. the benefits of the mortgage interest deduction to a taxpayer in the $250,000 or over category relative to the 45,000 to 75,000 bracket is about 10 times greater -- $45,000 to seven $5,000 bracket is 10 times greater. there's a justification for a subsidy to the hiring come home owners that is 10 times the subsidy to the more moderate income homebuyers. there are lots of ways to address this. i think going forward, this discussion needs to be part of it. it is also the case as i was thinking about this that we are doing a lot of work and physical
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challenges facing the country. i realized that most of the home ownership benefits come through the tax system. 80% of the rental assistance comes through spending programs. how congress and the administration address our fiscal challenges of the issues we're talking about today. 20% of rental subsidies that come through the tax credit, we have seen with the collapse of the tax credit has brought production to a halt. in the tax reform claims this late as it did in 1986, we need to think about how the investors will be provided for.
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if you look over time, you will seem with the equity requirements of rental investment are in the assisted housing sector are all policy determined. the housing tax credit replaced accelerated depreciation. we have never had investors having to put heavy duty equity in front of the development of assisted housing. those are some of the issues that i want to surface. >> thank you, mike. we have about 10 minutes left. what i want to focus on. we had discussion on the earlier panel -- sorry. 10 minutes left. we had discussion on the earlier panel and there was seemingly some come reduce some consensus about guarantees.
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one of the central questions, i think, that has been brought out around this issue of connecting housing finance particularly to the underserved markets is the nature of the affordable housing goals and how that system should change to either be more explicit, more direct, some have even called for a tax that might go directly to support affordable housing verses a system more like we saw with the goals that tried to imbed serving affordable housing through the mainstream business. i wonder if any of you might want to comment from your perspective about the nature of that discussion and the choices we will need to make going forward. >> i think you need to have both. mike made the point really
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clear. as we are attempting to solve a really nasty fiscal crisis, just relying on existing appropriations is probably not going to results in equitable and positive housing policy, particularly for the underserved population. i think there is more money that needs to come in the system. i also think it is a matter of all parts of the system which use the government. we managed to demonstrate that over the course of the last two years. even if you just live in it to have access to this guarantee that everyone is talking about, they need to take their role in making housing affordable. when we have a world in which a
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large portion of the population is paying an absurd amount of money for housing, we have to mainstream the issue of affordability. it cannot be off in a corner or else we really not a three-tier system but a five-tier system. >> i want to make a quick remark. i'm constantly distressed by this crisis being used as an excuse that we ought to change the nature of homeownership. maybe it was a mistake to hit 69% and we should go back to 60%. i have been around almost from the beginning. it is not the borrowers. i restructure loans. let me tell you, every day i go through the agony of seeing the lower middle-income people who put whatever money they had in the house that they could have never have afforded because they
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were sold something that made no sense. they could have bought a house, maybe a more modest house, but it would have been a house. now they are in a position where they are facing foreclosure. we have a golden opportunity in front of us. we have millions of units. in the first instance, we should not be taking these people and by one form or another, second mortgage or whenever, forcing them into foreclosure even when the lender does not want to foreclose. and is happening. in the past, we have been able to turn the crisis into an advantage. we have millions of units that are vacant. if we are going to spend money, do a rented to on program. we know it works. we have seen it work over and over again. -- we should do a rent-to-own progrm. millions of units that are now
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turning into abandoned properties, we should make them work. this is a once in a lifetime opportunity to come in effect, and franchise a holder for people like we did in taxes. for those of you who do not remember, we were selling houses in houston at $10,000. he literally took all of the inventory from all of the banks, because it was all ensured, and he created something called the fifth award program. it was one of the most depressed neighborhoods in houston. we did a rent-to-own program and it was a model we used for two decades ever were in the country. we are not doing that. we are sitting here bemoaning our fate. oh. gee, these people will have to go to rental housing. i do not agree with the premise
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one but especially when we are in the most affordable time with literally millions of units going to waste. >> mike? >> you talked about the goal and you can talk about the broader need. what we have seen the starkly is the structuring -- what we have seen historic fleet is the structure and cursed be very complex. it is near impossible to administer in a some kind of a national way. i think it goes without saying in terms of this. there is clearly a role for the government to play in a very explicit way to provide from a policy standpoint some support for housing in certain areas. what can you do in between? i think there is a lot of merit in completing a structure for housing that conduit entities would have to pay fixed fee,
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channel the funds into local markets where local decisions get made about how best to serve housing in that particular area. the spectrum of possibility will be more useful to pursue an to reinstitute a legal structure as we have seen in the past. >> mike? \ thatve fallen to the camp supports imposing a duty to serve on beneficiaries of mortgage-backed security guarantees or whether reform the guarantee may take. i do not think, personally, that the affordable housing goals contributed significantly to the crisis. on the other hand, it is not at all clear how significantly they
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added to the net supply of affordable housing. the irony of the big debate in my mind about the role of these goals is that the regulator has the loan level data that could really inform this issue. secretary geithner says we really do want to figure out what caused the problem. there is literature about the role of these goals and all of it is using data that is less than perfect in order to come to their conclusions while gse's have the data and it ought to be made public for evaluation. i would favor a continuation of a duty to serve. >> mark, last word?
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>> the phillies will win the world series. i think it is fair to say that when i hear is a great deal of consensus. we have parties coming from different perspectives in different part of the housing and mortgage finance market, but it seems there are some significant commonalities. one key commonality is that the government will have to continue to pay -- play a significant role going forward. there's no way around that for the foreseeable future. our housing, mortgage, and the broader economy will require that the government remains in involved in these markets for a long time to come. >> i think you all very much. fascinating session. i look forward to the rest of the conversation today. thank you. [applause]
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>> one of the things i regret that the political and rhetorical life in washington is that every major figure from the president on down is merely reading what someone else in some committee has produced. >> he wrote speeches for the carter administration and the secretary of state. he writes and he is the weekly editor of "the weekly standard." >> according to government reports, 25% of the nation's 600,000 bridges are considered insuffiwitnesses included an ofl from the federal highway administration as much as they
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offer a report on the nation's bridges from the transportation department's inspector general office. this is two hours and 10 minutes. >> we are holding a hearing on oversight of the highway bridge program and the national bridge inspection program. i read the testimony. but i think there are some serious issues and efficiencies here. in terms of federal oversight, but it is buried. you could not tell from reading testimony or the gao report. i'm used to reading these things. they were buried in there. there were brief references to problems with the states that had a whole bunch of bridges that should have been weight limited or closed and they were not. i believe it is a much more serious issue. it is my hope that the panel
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will be more forthright in their testimony in addressing these issues. it is not acceptable to be putting a lot of federal investment out there, sending it to the states that have tens of thousands of bridges that are either weight limited or functionally obsolete and not know how the money is being applied or that it is being misapplied. we had a hearing because we see the there are real concerns, and then we hear this rather turgid testimony. i have already read your prepared remarks. the staff has read it. i assume the minority has read it.
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but turned to my colleague. -- i turn to my colleague. >> thank you for calling this hearing. the number of bridges here are not up to standard has declined, which is good news, but there are almost 20,000 bridges in my home state of tennessee alone. while the decrees that i mentioned in the number of deficient bridges is good now is, recent reports have brought to light a variety of issues highway bridge program that need to be addressed in order to continue
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the progress that we all want to see made. the report that we will hear about today claims that the highway program is not focused on the federal interests, therefore we should not use federal funds on too wide a variety of bridge products. the report also notes and no clear time between the funding and the improvements. the report denotes a the needed repairs to bridges but does not take into account state effectiveness. today we will also hear from the inspector general's office about a report that the office released earlier this year indicating that the bridge
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standards were not adequately overseen. lack of oversight of the bridge inspection standards led to highway funds being distributed to states that did not comply with bridge safety regulations. this hearing provides us the opportunity to discuss issues raised so that we can address them in the next time i authorization bill. i look forward to hearing from witnesses, and i thank you for being here. >> we have had a request for a member to sit and do i do not see, so i guess we will entertain that if he shows up. we will turn to the panel. first, the assistant inspector general for highway and transportation projects. >> members of the subcommittee, thank you for inviting me here
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today to update you on our work on the federal highway administration's oversight of these two critical bridge programs. we've identified significant weaknesses and the programs. further actions are needed to enhance oversight and maximize the return on bridge investment. i have three points. first, a federal highways need to fully implement the data driven risk-based to target high priority respites -- brisk barie to target high priority risks. second, states must comply with bridge safety standards. we have criteria for determining compliance as well as overall procedures that people in the states should follow, and we want to see sustained management
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attention to ensure that this new guidance and criteria are rolled out nationwide before next year's inspections cycle. finally, we need to strengthen oversight of the state's use of billions in federal bridge funding. to do so, we must have sufficient data to evaluate hoow funds are spent. these actions can help stretch limited federal resources. this concludes the summary of my statement. i am happy to answer any questions that you are other members of the subcommittee may have. >> thank you. we'll hear from the associate administrator for infrastructure. >> members of the subcommittee, thank you for inviting me to discuss the federal highway administration's highway bridge
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and national inspection program. we have a strong program that reinforces safety as our highest priority. we've made significant efforts to redress regulations made by the inspector general and gao to ensure the complete safety of our nation's bridges. in response to recommendations from the 2009-2010 audit of oversight, we are developing detailed criteria to help it bridge staff evaluate compliance with the bridge standards on a more uniform basis. we have policies and procedures for national oversight to be agent driven and risk based. we are enhancing staff and implementing a new oversight approach in 2011. we are effective in disseminating useful affirmation on bridge management implementation by the states. we are taking steps to improve the quality of data in the
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national bridge inventory, and we are enhancing the financial management information system to allow improved tracking of bridge projects and obligations. the gao recommended that we work with congress to identify specific program goals in the national interest, develop and implement a performance measures, and incorporate the best tools and practices, and review the funding mechanisms. we continue to work with congress on these recommendations. throughout the process of the next reauthorization, we will be pleased to work with this committee to further improve the conditions and performance of our nation's bridges. this concludes the summary of my written statements. i would be happy to answer questions. >> thank you. the director of physical and for structure issues at gao. go ahead. >> members of the subcommittee, thank you for inviting me to this hearing on a highway bridge
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program. i will briefly discuss the current state of the nation's bridges and the extent to which our program alliance with the gao. national bridge inventory data indicates that one and four bridges are considered deficient. while the number of deficient bridges has declined from 1998- 2009, it was not possible to determine the extent of the program's contribution to this decline, because states can use bridge funds for a number of other purposes that did not necessarily reduce the number of deficient bridges. first, the bridge program goals are not focused on clearly identified federal interest, and expanded, making any bridge potentially eligible for federal funding. reconsidering the brett of this program would lead to a better focus. second, the funding level is not tied to performance
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improvements. programs should tie together funding, performance and accountability to enhance outcomes. third, the bridge program lacks sufficient tools. currently, states used tools such as bridge management tools. we are encouraged by reports of f h a taking steps to use our information. finally, fiscal sustainability remains a challenge in light of aging bridges infrastructure. this concludes my oral statement. i am happy to answer questions. >> thank you. finally, the chief engineer of the virginia department of transportation. >> good morning. i am the chief engineer for the virginia department of transportation. i chaired the subcommittee on bridges and structures. thank you for the opportunity to share our views on the
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federal/state partnership in ensuring that we have safe and well maintained state and locally owned bridges across the country. i would like to make three points. first, we are facing a perfect storm regarding our bridges. a large number, especially interstatehe inter system, are reaching the end of their useful life. traffic is increasing while material costs are decrease it -- traffic is increasing while funding is decreasing. if we had all the funding we needed, states could immediately reconstruct or rehabilitate all of the bridges. but we do not, so states must select a more strategic approach, working to reduce the number of deficient bridges will simultaneously working to
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prevent an even larger number of bridges from deteriorating just enough to push them over the edge to structural deficiency. we call these cusp bridges, those bridges that we can prevent from becoming structurally deficient and requiring major work if we just invest a lesser amount to extend their useful life. third, i want to respond to reports the state for transferring funds from the federal bridge program. states to transfer funds to allow them more flexibility. however, states are investing substantially more state dollars and then what is provided under the federal highway bridge program. transfers between federal highway programs are simply a management tool and do not reflect the actual spending levels. for example, in 2004, $10.5 billion was invested in bridge rehabilitation by all levels of
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government, more than twice the amount appropriated for the federal highway bridge program. bridge safety is one of the highest priorities. we stand ready to work with you to deliver a safe and well performing bridge program through the federal/state partnership, and programs of that stretch our available dollars. thank you. i will be happy to answer any questions. >> thank you. we will now proceed with questions. the first question in the january 20th 10 inspectors general pureport documented one instance in which the state closed 96 bridges as required by the national bridge inventories does some -- inventory system, and posted bridges the fail to
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meet the national way to let requirement, 205 hundred respectively. in all of these instances, the federal bridge program reported states to be in compliance. was headquarters aware of these instances of noncompliance prior to the release of this report? what actions, if any, did you take to ensure that these states properly closed the bridge as? what procedures will be in place during the 2011 national bridge inventory review cycle to ensure that these sorts of incidents don't happen again?
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>> in the instances where you cited the report, we went back to find out what states at their work. there were data inconsistencies, and the bridge engineer did go back and verify what the informations showed. in both cases, the states were declared in substantial compliance rather than in full compliance. we have since gone back to follow-up on information made available and worked with the states to rectify the matters. >> are you saying that there were not 96 bridges -- you're saying there was an inconsistency, there were not 96 that should have been closed? >> correct. >> what was the number? >> it was less than half of that. >> we had about 50 bridges that should have been closed that were not closed, and that puts them in substantial compliance.
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is that in your regulations? you have 40-50 bridges that should be closed, you have not close them, and you are substantially in compliance? >> we do need changes. the bridge engineer in our office has identified engineering judgement enand revw the information. >> do these engineers use of these bridges? do they want to drive over them with a semi truck in front of them were behind them? >> in some cases, we do a review to make sure it should be closed. in other cases, the animation is not correct. going forward, the third part
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was -- in other cases, the information is not correct. going forward, the third part was what are we going to do in 2011? we are tightening up the definition of noncompliance in the work that we have been doing since this report. we have set up a new approach to compliance reviews here it is a risk based band data driven -- compliance reviews. it is risk-based and data driven. we are tightening definitions. we're setting up a process where they have to go through and very narrowly defined tolerance to determine what is compliant and what is not compliant. we will be using those to be much more proactive from a national perspective in working with each individual state. >> these will be implemented when? these changes? >> in the year 2011.
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we have just started the process in 12 states because we want to make sure that the definitions are the same way. we are evaluating the pilot right now, and we will be making the final changes and getting into our bridge engineers. we're also in the process of hiring additional staffing to help with the training and implementation of the overview of oversight process. >> do you think the pending changes will preclude a repeat of the problems you documented? >> we are familiar with the changes. our 2009 report focused on the question of giving the engineer is adequate guidance to determine whether a state was in substantial compliance. they themselves told us they did
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not have good guidance. they could identify individual standard issues, but they had not good guidance on how to produce an overall conclusion. we used -- >> meaning, when you get to the point of substantial compliance, what is that the overall conclusion? >> right. we looked at the various they had to let that in order to come to conclusions like inspection frequencies and issues like that, but they were on their own, more or less, when it came to making a conclusion about being in substantial compliance. they told us that they would like to get better guidance. we looked at highways own data, which is where the figure comes from, and used that to indicate where you would think there was a significant problem but the state was still in substantial compliance. as for the proposal, we made
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recommendations, they responded positively. it includes issues we have said should be in such a proposal. it establishes minimum standards. we had found in the past sometimes that highways might give tools for the safe use -- for the states to use but the states were not using them. this will include minimum standards, at risk based criteria and metrics, and clear guidance on how to go forward after you define a deficiency. that was a variation we also found in states in regards to what to do to enforce a problem. in some states, the state responded quickly. in others, it took up to two years to solve the problem. but the state had a different policies in place for how to get a plan going to fix these problems. from what i have heard from federal highways, this proposal will address those issues.
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it has been piloted, and we will be monitoring it closely. as an auditor, i am paid to be skeptical, so we will not be closing that recommendation until we see the documentation supporting the fact that it has been rolled out nationwide and these new criteria and guidances' are fully implemented. >> thank you. i recognize that a member of the full committee has arrived. he has asked for unanimous consent to take part in today's hearing. hearing no objection, he will be allowed to take part in the hearing according to the custom of the committee. but with that, i turned to mr. duncan. >> thank you very much. mr. gi, i noticed that in the
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department of transportation condition and performance report you said that $1.9 billion could be effectively used immediately to bring all of our bridges up to snuff. have you studied that figure? how did you arrive at that figure, and the think that is a realistic or conservative estimate? >> that is that is a wish list kind of estimate. >> it is not a wish list. it is an analytical process. it is a model the projects what is needed on the 600,000 bridges that we have in the system. it is also based on the structural needs, but also
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improvements that may be needed or economically justified on bridges that are not structurally deficient. it is all of the improvements that can be made from an engineering standpoint and from an economic standpoint. >> according to the material we have been given, we have 603,000 public road bridges, and approximately 150 cells and are deficient. -- 150,000 are deficient. do you think we are doing an adequate job concentrating this funding on where the money actually needs to go on the more high-volume bridges? >> under the structure of our highway bridge program, which is also true for the rest of the federal highway aid programs, it is an eligibility based program. it is a program where the states
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are given the prerogative to choose which projects and therefore which bridges to spend the money on. what we have in a highway bridge program is an eligibility criteria based on the structural deficiencies, obsolescence of a bridge. in order to use that program dollars, it has to be below a certain threshold of a rehabilitation or another threshold of replacement. but which project to choose is the state's -- >> we are targeting roughly $5 billion in federal funds and $10.5 billion in the states. are you advocating a big increase in the federal funding for the program?
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where do deficient bridges rank in priority within the department of transportation? >> we have just finished a round of town hall-like listening sessions. we have not finished considering all of the input, so i am not in a position to represent that today. >> all right. current practices do not ensure that states are using highway bridge funding affectionate effectively. what do you say about that? secondly, when you mentioned overall funding, how much does the state of virginia receive for this program, and how much does the state itself allocate to bridges? >> to answer the second question first, for fiscal year 2011, we
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received $111.7 million. in state funds we have 20 two $0.4 million -- $22.4 million dollars. >> as was said but others here, the number of division decreases has -- number of a deficient bridges has decreased over time. to make a statement that the states and not addressing it deficient bridges may not be correct because that number keeps going down. we have a large number of bridges from the new deal area, from the estate area -- and the
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interstate area, the average age is 43 years. you have to make a decision on balancing preventative maintenance, maintenance rehabilitation and replacement. i think that states, with the funding that they have, are trying to address a growing problem in the bridge program. >> you are here as a representative of all of the state and department of transportation officials across the country. where do you think most state dot officials would rank bridge efficiency as a problem? would it be one of their top three problems a? what would you say about that? >> from an official viewpoint, i would say it is in the top five. in the state of virginia, for instance, our commonwealth
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transportation board has highlighted deficient bridges, deficient pavements, but especially deficient bridges in our six year program. i think it back to you with an official viewpoint. -- i can get back to you with an official viewpoint. >> in an appropriations bill, two hundred million dollars was transferred away from programs such as a highway bridge program to a livability initiatives funding that would include sidewalks and bike paths. does the state of virginia need more money for bridge repairs or more money for sidewalks and bypassed? -- bike paths? >> from my viewpoint, we would support the bridge's first. if we do support the quality of life enhancement for our
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citizens, but it is a matter of the amount of money in the budget. >> our next ranking member is mr. hall. >> this is an extremely important issue in my district. we have 13 bridges designated structurally deficient. these bridges, along with countless others within the states control, are being closed. i think the county is trying to make an example by fixing the bridge i crossed last.
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your office has issued several recommendations. one was a performance based oversight of states use of funds in reauthorization. have these steps been taken? >> at this time, we are not satisfied with the pace of the response to our recommendation. there were three main issues we wanted to address. first, to try to acquire better data so we could connect to the
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funding spent done and structurally deficient bridges to those projects. we recognize that the system for tracking that information does not include the detail. in response to our report, they had told us that by may they would provide us with an assessment of what changes they could make. what we also wanted to be done with this information was at the intermission be used to evaluate the effectiveness of the program -- was that the information be used to evaluate the effectiveness of the program. at this time, as we were preparing for the hearing we did hear from federal highway said they are now making commitments to make some enhancements to the fiscal informations systems that they have that will better
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track the intermission. we welcome that information. we will -- better track the information. we welcome that information. we will be getting specifics on that going forward to see if that more fully addresses our recommendation. >> thank you. the inspector general, in january 2010 reported that the accounting system does not have the capability to track federal aid spending on structurally deficient bridges. is this just a matter of legacy software or is it inherently difficult to track spending at that level of detail? our states able to track misinformation reliably, and what can we in congress do to help you better track the impact of or use of federal aid funding under -- federal aid funding on a deficient bridges? >> the answer is yes.
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as the program has changed over time, we do have a legacy system that was not designed to do that kind of tracking but we are looking at a fixed to the current system where, when a project is authorized, the bridge number will also be tagged for that authorization. the challenge, however, is that in many cases a single project has multiple funding streams and model parts to it, one of which is at the bridge. others are paving and wiring. we are looking at what we can do to track what is being spent on what element of a given project. in terms of -- so i think, technically, we are working on it. there is nothing i can think of right now that we need from legislation.
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>> thank you. lastly, since i am running out of time, there is a report that there are 630 ineligible bridges that are on a delayed inspection schedule. can you describe the process that you used to negotiate delayed inspection schedules and to provide written approval to extend the period of inspection? what steps are being taken in this situation? >> in general, the royalist 24 months on fracture critical precipitous -- the rule is 24 months on a fractured critical bridges.
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our engineer in any given state will go over what is being proposed by the state and will evaluate the condition of the bridge, evaluate what they are proposing to do to determine whether there is justification for lengthening the inspection frequency. >> thank you. i yield back. >> thank you. mr. brown will be next. >> thank you. i know in south carolina transportation is a major issue that we have. in our beach area, we have 40 million visitors per year coming in, so we appreciate your support and try to meet some of those congest and needs.
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the way the funds are generated or distributed among the states, is it based on some formula or some need formula? exactly how those funds distributed? >> the highway bridge funds are distributed by a formula that includes a factor on the condition of averages, structurally deficient bridges in general with in any state. all of that is aggregated, and then the ratio and the cost to repair and replace it is factored in. >> city would have a list of all of the structurally deficient bridges and then rank that -- so you would have a list of all the structurally deficient bridges and then rank them buy it the priority -- rank them by the
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priority of the need? >> correct. >> i understand that millions of dollars have been used for other programs. the information i have here says that since 1992, up four $0.7 billion in highway bridge program funds have been used for other accounts. >> there are transfers out of the bridge program. under the current legislation, states can transfer up to 50% of a given program, the highway bridge program being one of
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them, into any other program. some states do that because i weighbridge program is the most restrictive in terms of how -- because the highway bridge program is the most restrictive in terms of how the funds can be is. -- be used. other moneys that are not spent on bridges are spent on management and preservation activities. that is a recognition over time that we have a looming bridge problem. it is not just a matter of repair and replace, but managing and extending service. we want to get the best return we can on that investment. >> along those same lines, what percent of the bridge replacement funds that you get in and virginia do you actually
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use to replace bridges? >> in the commonwealth of virginia, we are required by budget language to utilize the bridge money in the bridge program. in the past, we have transferred money, as indicated before, but historically, we spend almost twice as much money on bridges vanna the federal bridge money that we receive. -- than the federal bridge money that we receive. >> who makes those determinations? >> the states have different ways. we have a prioritization that we is that takes into account structurally deficient. most states have a prioritization where they're trying to look unbalance the money that they have between replacing bridges, rehabilitation of bridges, maintenance of bridges.
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when we develop our six year plan, and most states develop their plan that they're going to do, they take that into account to maximize the use of all federal funds that they receive. >> thank you. >> thank you. mrs. napolitano is next on the list. >> thank you. i am kind of listening to what you're saying in terms of the state being allowed to use transportation money for other proposed bridge -- not necessarily the bridge repair. my concern or question would go to, is any tracking being done to ensure that that bridge continues to be on the list of needed critical repair because
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money is not being used where was initially operated to? are you tracking it and does the average continued to be on a listing, if you will? how do you track it? do you have the software? are you developing any new processes to be able to determine whether this methodology is being penalized to do the repair? -- being utilized to do the repair? >> the national bridge inventory has the affirmation of all of the structurally deficient bridges. that -- has the information of all of the structurally deficient bridges. that does not go away whether we have the money or not. you do have to request the action of transferring money out. in the last year, six states transferred out a total of $300 million. that is not a lot compared to the total, but there is a
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penalty for transferring money out. whatever the transfer out, the following year is deducted from their proportionate amounts from the highway bridge program. >> what about the software to be able to do that? >> to track the structurally deficient bridges, yes, we have that. >> and are you able to determine whether or not the new technology is being used for repairs that might be more efficient, less costly? >> we have high performance concrete and high performance steal the we have been promoting for a number of years now. we always do research in disseminating and applying technology in to get the best performing bridges that we can. >> it is critical to many of the
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oversight decisions that you have the correct data. biles and cemented with significant errors or supposed to be -- files submitted with significant errors were supposed to be returned. what is being done to ensure this? >> data is submitted from the states on an annual basis. we get data every year, and our divisions now have a tool with which to evaluate the data they receive from the state. they're doing the checking, but then we do a further check.
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we have sent a data back. there is one state right now we are waiting on a corrected submission from. >> is their personnel to do this? >> on the state bar or on our part? >> we relied on the states to tell you whether they have done it, and of course there have been some reports that there are data problems. >> we have three states that are currently not in compliance. part of it is the inspection frequency, and that is because they do not have enough staff to do the inspections. they're being required to put together a corrective action plan. in two states in the last half year we have actually threatened withholding of approvals for projects, not on bridge projects, because we do not want to be cutting off funding for bridge projects that we want them to improve, but
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we're looking at leveraging other categories of funding that we will not improve in order to get -- not approve in order to get compliance. >> so there is a penalty? >> it is not a penalty, but is a threat to get compliance. >> are you considering of bridges susceptibility to burning? many homeless are living under bridges burning fires to keep warm. >> we are looking at all of the environmental factors. when a bridge inspection is done, an issue is documented. >> thank you for the opportunity
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to participate in this hearing. i have a statement, not a question. all of the committee members note that states are required to spend 15% of their annual bridge funding on office system bridges. it is my understanding -- on off-system bridges. it is my understanding that a new program eliminates that funding. that funding is critically important to states like mine. missouri is home to more than 13,000 off-system and bridges. 1700 of those are functionally obsolete. several thousand are deficient. if that funding is eliminated,
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misery will fall into disrepair. a bipartisan measure expresses support for continuation of this bridge program and a dedicated funding source. i appreciate the committee leadership consideration of my request and i look forward to continuing the dialogue on possible reinstatement of dedicated funding for the off- system bridges in future transportation reauthorization. i have a full statement, and i would ask unanimous consent to submit for the record. >> with that compares -- with that, our next question. >> about two years ago, i had an experience where one of my
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department of transportation representatives suggested i take a ride with him. we went up in a bucket under one of the bridges that was one of the main bridges that i drive over every day. my wife and kids drive over it. he said, take a hammer and attack on that country. i did. it was quite sobering to see chunks of that country to fall. -- chunks of that concrete fall. this is one of the bridges that most traffic in my community drives back and forth on. my concern is this. we continue to build more bridges every year because people want to have more and better bridges. we spend more money, and then we continue to need to repair the bridges and that costs more money with each passing year.
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it seems much more of our money goes to repairing bridges that already exist, that already have defects, building new bridges, and the states are not spending money on the maintenance. i'm from upstate new york. we have seen the devastating effect on our bridges. i am not sure if this is a comment or question. are we doing enough in terms of the preventative maintenance? are we spiraling out of control? are we going to be able to have enough, to appropriate enough money to meet the needs of building new bridges where they are needed, maintaining the bridges that already exist, and then doing the preventative maintenance to make sure that we do not have problems into the future? i think the states do not have the money to do the preventative maintenance that they need to
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do. >> thank you for the question. the maintenance, in general, is the responsibility of local and state agencies. we are allowing preventative maintenance and preservation activities to be paid for with a highway bridge program funds. that is, again, trying to get the best return on our bridges. we have been working on design and material research to come up with a 100-year life bridge. right now we are shooting for 75 years as a design life. we have a research underway to go for 100 years. on the maintenance side, there is a requirement on the overall program that states maintain whatever federal funds have been put into, whether it is a bridge or a roadway, and we actually require that from states. >> are we going to be able to continue to meet the needs of
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the bridges that we already have into the future? >> in the conditions and performance report that we submit every two years, there is a note that says that if we continue funding at our current level, the deficiencies will go uppe. >> is there a state perspective on that? >> the state's work very closely with the federal program. the flexibility to use money for preventative maintenance has helped states tremendously. there is probably in the last three years a renewed interest in preventative maintenance. we have formed a regional groups
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working together to concentrate on preventive and maintenance. the states and the fhwa have been emphasizing more asset management approach to try to address those maintenance problems. i assume where you were was probably under a leaky joints. if it had been fixed in time you would not have had that concrete come off when you were in the that bucket -- were in it that bucket. >> can we do more on the federal side to help the states with preventative maintenance? >> yes, sir. >> thank you very much. >> thank you all for the work you do. it is incredibly important.
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i am sure that the chairman will remind us all that on that hot day in minnesota, that was a father and daughter not getting home on the day the bridge collapsed. it is unfortunate that it took a tragedy like that to draw attention to this, but all of us feel it. we have another bridge across that wasssissippi closed following inspections. i am glad we got the inspections done, but those types of situations caused a 100 mile detour for people. it is scheduled to be repaired for the next five years. the state has no idea how to pay for it. my question is, how are we as a
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country prepared to handle this issue? structurally deficient, obsolete, all of these things, it is only a matter of time before there is another one in the river or something. my question is, are we doing enough to have an honest discussion with the american public about what is going to cost to replace, repair, and keep our bridges up to where they need to be? i know that is somewhat subjective, but i just want to know, are we going to get there, because i have no faith right now, and the editors of my local paper havethat we are working together to address the issue on one small bridge in one small town in one state. couple that by the thousands across the country. >> crisis.
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-- thank you. our work has been focused not on where the money has come from, but on how to more effectively spend the money. first and foremost, we need to effectively assess how we're spending the money we have now. doing that requires getting better information on funds directed toward structurally deficient bridges. in our work, we found that systems and tools were not in place to do that. management has told us that it will be hard to develop better tools. we recognize that these tools are not easy to develop, but without better tools, we will not be able to better utilize the funds we have now. likewise, on the inspection side, no matter how much we are putting forth the bridges, we need to have good inspection
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programs. oversight of state programs is important. from our side, it would be getting improvement in those tools that will enable us to stretch every dollar that we have. >> on larger bridges, oftentimes the state does not have enough money in the bridge programs to do all of the bridges it has, as so often times the state will kind of big the money -- bank the money until they have enough. in many cases, because of the size of the project, project financing has got to be part of the consideration. a number of states have used that and have used federal dollars in bonds to do that. our concern is the level of debt service the estate may be incurring in order to do that.
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to go back to the other part of the question, i think for the past 10 years or more, even for the minnesota bridge, there have been articles about the state of bridges in the country. i think that there is a lot of information going out there. the challenge that we have is, in some sense, we actually do not have a crisis today, but if we go forward without addressing it we will have a crisis in the future. >> some of the work we have done suggests that we need to stand back, prioritize, and look at the broader picture. in a case of a bridge like this, if something like that were in place, it would help if the state had a sense of what the priorities are. in the sense of a large project that is more costly, that maybe something that could arise if an approach like that were to be
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taken. certainly the difference between the funding level available and the needs have been identified is something to take into consideration as well. >> the national bridges are getting older. as i indicated in virginia, the average age of our bridgeses 42 years. we have -- bridges is 40 two years. i agree that we do not have a crisis right now, but i think you can look on the horizon and you can see that more funds are going to have to be put in to maintenance, a shift to asset management to try to maximize what is responsible, and in the larger urban areas, the number
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of deficiencies are going up because there is more traffic and it is harder to do those. we're trying to extend those lives as much as possible. in 2006, department of transportation's report said that $8 billion in capital annually is needed to maintain bridges at the current level, and $12.4 billion was actually needed to improve bridges and the current level. i believe states are working very closely with the federal highway administration to identify and take the appropriate action, whether it is to close the bridge or improve a bridge to an approved safety and traffic flow. >> we realize up here that one of the attributes of leadership is vision. let's hope that we have the vision to not get to the crisis point, to have the courage to deal with it. >> i'd just want to intercede at
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this point. i am not sure i got the full range of cancer you should have received. minnesota legislature -- a full range of answer you should have received. minnesota governor vetoed a new tax. for bridgeve paid repairs. that underscores a problem that we have dealt with in this committee several times and we deal with in our new authorization bill, and that is, the current law gives states authority to transfer up to 50% of their bridge funds to other purposes and they have done it. then they turn around and complain that the do not have enough money for bridge replacement, when they have used their flex authority to flex money out of the bridge program into something else.
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then the complaint to u.s. -- and then they complain to us when we try to tighten the noose of us and tell us to develop the bridge inspection, replacement and maintenance program with annual benchmarks of achievement, and then you report back to the u.s. department of transportation end to this committee and our senate committee on your achievements and your accomplishments. these are the most costly structures. the 545,000 bridges on the national highway system, of which, have now are structurally
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deficient or obsolete carry half of the bridgett traffic in this country. some states had excellent records. in 1987, i held hearings on bridge inspections, a bridge safety. on the 20th anniversary of the silver bridge collapse, a professor of bridge engineering testified at the table saying bridge inspection is "in the stone age." we are dragging chains over bridges to listen to a structural deficiency. 20 years later, there are still
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dragging chains of for bridges to detect structural deficiencies. on meanwhile, we have given tens of millions of dollars for studies, evaluations. there are university research centers and we are still in the stone age. this is unacceptable. i yield back. mr. duncan,? >> i have already asked most of my questions. i will just take a moment -- do you have an estimate as to what percentage on average would they're transferring out of the bridge fund?
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>> it was in the $2-$3 range. they wanted something to use more of that flexibility. it was made up through the equity bonus program. >> i did not hear the last thing. >> one of the states that utilized that opportunity for flex finding out of the bridge program, pa., they made that the funding lost in the equity bonus program. it was noted in the report. if the other witnesses do not have the information, i can get that for you. >> will losses seen in your testimony that you feel when there is a lot of important data that is lacking such as the comprehensive state and local spending. is there any way -- can you really adequately judge the
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impact of the program without that kind of data? >> we think it would be very important to have the complementary data to have a full assessment of what the program. >> we heard earlier that while the federal funding was around $5 billion and the state provided $10.5 billion, how much is being provided by local governments? >> i believe the $10 billion -- >> it was state and local tax >> it was the total fall all levels of government. that includes. >> that included the federal funding, also? >> yes. >> how much of the $5 billion is coming from the states and how much from the local governments? do you have that? >> no, sir, but i can get back to you on that.
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>> thank you very much. >> return now to ms. martin. >> thank you, mr. chairman. i have a 36 bridges that have been deemed structurally deficient by our state department of transportation. can you hear me? one bridgett couple of years ago, there was a fire in southeast colorado. there were killed because the truck they were in went over a bridge and they collapsed. it is a critically important issue. this report says an astonishing number, $98.9 billion could be invested immediately. i am intrigued of the title of the report that says they have taken actions but could do more to strengthen oversight of
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bridge safety. i think one of the mentioned that you were doing quite a bit of oversight of state programs. the question in my mind becomes, we have a limited amount of dollars. there is a lot of oversight being done. federal authorities are overseeing state programs that are overseeing the bridges. the talk about how extensive the oversight role is to the states? he said the stage and not always doing their jobs and there is a federal role, but i wonder, but do you find much duplication in oversight? i worry when we talk about more oversight, what we really want to do is get the money to repair the breaches which is overseeing federal programs that are
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supposed to be doing that already. can you talk to me about the extent of your role in the oversight? >> i do not think i can quantify, but we are a very, very small percentage in terms of the administrative cost of the oversight we provide to the states. principally, we have one bridgett engineer in each of the 52 states, the district of columbia, and puerto rico. we have a bridge engineers and other conflicts in our resource center. administratively, it is not a large amount of money. >> how much of your budget would say is actually going to help states fund projects to replace
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or repair bridges? >> i would say the vast majority of our administrative cost is for project delivery. the bridge engineers i referred to, the focus on compliance and after review bridgett plans. they have to -- >> i yield back. >> i regret we went out of order. in -- >> mr. gee, much has been talked .bout for the state's
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can you provide a list of these states? >> in 2009, $5.3 billion was distributed. however, the gao report issued found that there is a flaw, in fact, because many of the bridges in the project, it is not being significantly rated or used. can you talk about that and in particular, when i first came on board, the chairman was going to the minnesota bridge situation. in my district, we have a bridge that brings over and it has a diaper underneath it. yet, we cannot seem to get funding to replace the bridge. if you could explain to me the
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ratings and why they are not being used or why you are not enforcing they be used in terms of priority of funding. i >> the ratings are used. as i said earlier, our programs are structured such that is the state's the prioritized projects. we determine when they put a project at the top of the list of whether or not it is eligible for the different categories of the funds that is being targeted for. our role in terms of the delivery of projects is to make sure they conform to the requirements in the category. in the highway bridge program, the sufficiency rating is used to determine whether or not a bridge is eligible for replacement or only for repair. >> if, for example, and i will defer to you when i finish this question, but you did not
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provide any oversight with regards to repair a bridge? you cannot provide oversight or correction to that? >> not on the bridge by bridge bases. we may look at an overall program and saying it may seem out of balance, but it is still the state's prerogative. >> why is it the state prerogative? >> in a section of the law, it is basically a state administered and specifically spelled out the we do not override the state's choice of projects. >> based upon your report, do you have any suggestions or areas we could focus on here to eliminate this problem you noted in your report? >> and believe it is the gao
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report you are referring to. we would point to the need to establish david gergen risk bases so that the highest priority risks can be addressed. >> you are correct. it was your report i was referencing. >> one point we have made in a number of different reports over the years is that standing back and focusing on the federal interest would help bring a bridge like the one you just described mobility, movement of goods which is a key criteria. it would help prioritize things and insure the federal interest, in this case one that might impact a good movements which affect many consumers and businesses in the country could be given a certain amount of attention. >> i yield back the balance of my time. >> i turned to the chairman of the full committee for his questions. >> i am delighted you have
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called this hearing. thank you for participating in working together to put this together. it is a little depressing to read this report and see we are where we were, in many cases, 25 years ago. i'm going to ask the call-up on the screen the sandstone bridge. unfortunately, you cannot see it very well in this picture. the the the underlying steel structure. it was built in 1948. it is bordered 50 feet over the very lovely canoe and kayak river in the central part of my district. it is the subject of the long- term average performance pilot program that we included in the
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current legislation. is one of four, ultimately six or seven bridges. i took this with my blackberry. there are wires hanging down from the bridge deck above. they are connected to the real are right in there. -- they're connected to the we are -- rebar. the bridge was redone about 20 years ago. if you could go to the next one? here is the crane underneath the bridge. they are attaching probes and wires to the underside of the bridge to the bridge structure
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itself. if you notice the graffiti in the lower right just above the crane arm, there is much more graffiti. that steel is so corroded that one of the bridge engineers said in a bit of humor, "they could miss for the graffiti. it is helping to keep the bridge together." the serious part of it is that this bridge is subject to -- and then underneath you see the very slow-moving river -- it is subject to severe freeze, all cycles, heat, cold expansion, contraction, and it is a perfect subject for the kind of analysis that branch engineers
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need to do to better understand bridges on the bridge deck itself, i do have a picture of the ground penetrating radar machine see you can see the wavelengths of the radar and the anomaly is when it strikes corroded rebar or water that has accumulated within the bridgett self that sends the sun normally. now they can cover the entire length of the bridge, find conversion, drill a hole to the corroded rebar, attach a probe, bring that to the end of the bridge, and then study the structure to give better
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understanding of what is happening internally in the bridge. now, the george washington on the virginia side of the potomac. are under the direction of the parks service. it has four overpasses that were done about 20 years i assign thumb 18 years or so, using in the concrete -- there we go. there is the penetrating radar.
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the had untrained people pushing it. there are the dots on the road's surface. they are the points where rebar has been detected and the screen as showing the anomalies. before they began this part of the test, mr. chairman, they dragged change over the bridge, but they're down and listen to it now they know where it is and they can grow holes, attached probes to the corroded rebar to see what is happening. back to the george washington parkway bridge the plastic than he did the -- and then he didn't, collapsed, and provided a very tight concrete surface.
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and also included probes attached to the rebar with the solar panels that provide protection to therebar. our drive their least four times a week i have not noticed a crack in the bridge. i have a pretty good look at it because traffic is so slow on that bridge. you're standing there for fiber 10 minutes at a time. you get a chance to look and outside the window and see where is happening to the bridge service. are realize that is not a normal practice for commuters. but then again i am a transportation guy and that is what i do. having the probes and having the ability to track -- there is
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the radar machine up close. . this is their rutgers center for branch transportation and infrastructure long-term payment performance per room. there are during inspecting, testing, and monitoring of the bridge and doing it in six locations, i think. this is the kind of work we need to have on alzheimer's the country. the replacement interstate 35 with sensors to detect expansion, contraction, into the concrete shropshire, protections for therebar and the bridge.
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they have things second detect wind pressure on the bridge. now, if airplanes have technology on board the aircraft fire pressure -- to tell you the tire pressure so you know what we have, we ought we are to be able to apply lessons from other modes of transportation, from one to the other. the reality is that? life averages 25 years. you have a conversion, the lamination, expansion, contraction, the corrosion of rebar. there are practices that can be put in place to protect the huge investments we put in these bridges like epoxy coating on
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the rear bar -- rebar. protection before you put on the final seal the code of the bridge. in the european union, imad, two years ago, with the ministers of transportation for the your opinion of their annual session. they discussed the membrane layers that are clyde before the final seal coat is applied that have resulted in substantially extending bridge? life. i want you to tell me what new things you are doing. what new ideas have you encountered and you are recommending for the future of bridge integrity, strengthening , and affection, and the
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lengthening the structural life of bridges. you look like you're ready to talk marks first of all, i appreciate your cornea of the long term average performance program and the support have given to that. and it is an excellent program. we have worked very closely with the f h w m --fhwa on that. as was mentioned earlier, our performance concrete, high- performance stereo, on cars and steel, the next track -- the next generation of epoxy coating, the different things that were put on denied 35 bridge are all things that are available for states to do. the question is which burgess to put it on, how to use a, would
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you do with the data, hard turner fairbanks and the federal highway bridge program has worked closely with the states. since 35, we have looked at various different things that can be done differently. i know they're looking at different inspection techniques to be used. to be honest with you can this comes down to finding concerns. which bridges do you put it on? what is the initial cost? would you do with the data darks that the states are open to any new technology we can use. one of the bridge committees
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strategic planners to the new materials and new methods to extend the life of the bridge structures that we have. >> that is what this project is aimed at, not just the sandstone ridge which was built in 1948 the graffiti is covering up some of the rest. the bridge deck has a 20 year or 25 year life span. with there attempting to do in this experiment is to see whether this protection which has been successful in the pipeline program, on the george washington parkway bridge structures can work on bridges already in place to extend the life of that? surface. >> we have used cathartic protection on bridge?
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-- on the bridges in virginia. there is cathartic protection there. >> was that done on the wilson bridge? >> i do not believe this was used on the wilson bridge that i'm aware of. but all of the things that you have mentioned are things that states are working on and working very closely with turner fairbanks. we have the opportunity to go to europe and talk to our car parts over there. we tried to borrow, steal anything we can to make what we do better, sir. >> thank you. i am glad you are on top of it. anyone else who wants to comment. >> from the very earliest days of federal highways back 100 years ago, one mission has been to promote new technology.
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we have a very active program of promoting disseminating information best practices that we learn in our research program. we're pushing nanotechnology. we find technology from overseas and we bring it back to this country to disseminate it and implemented. we also look for private sector renovations. we have an active program with some private companies to accelerate the commercialization. >> i'm sure there are many other engineering companies who are worldwide and they are contributing their knowledge and experience to this long term average performance program. >> on the inspector general's side, we have been looking at
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improvements to business practices. one thing we have called for is improvements in corporate risk assessment processes infhwa looking at similar programs that have to do with mobile carriers or large airlines. we're looking for them to use this at the corporate level, information they have to identify high priority bridge safety risks. another business process we look at where the attempts to encourage more bridge management system use across the stage. these are computerized processes that can improve asset management. fhwa does not mandate the use, but we recommend they gain information on how the different states are using these systems said they can then target their educational and training efforts that the states that could more
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fully utilize the computerized systems. they have agreed with those recommendations and i am planting them at this time. >> highlighted a similar point. we also talked about the element level in inspections being done to assess structural integrity of bridges. on the other side of the question that you raised, to make sure that states are involved in the state of the art matter as well. >> to pick up on that point in a move to another issue, that is calculating bridge load it ratings and also understanding better how to conduct major inspections. one of the salient factors cited by the ntsb in the interstate 35 bridge collapse was that the
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deficit played that failed -- -- the gussett plate that failed was misdesigned. it had assumed the design and engineering integrity of the bridge itself. we will start from what never was built that it was designed properly and built properly. no more. no longer. it is stunning to go to the ntsb offices and see the replica of the gussett plate, an 8 foot by 6 foot, not steel, but a replica and see how big this piece of steel should have been. it should have been 1 inch
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thick and and not disturb 0.5 inches thick. i would hope this should be part of the inspector general report, conducting bridge inspections and to go back and review the design and engineering plans for the bridgett self -- the bridge itself and determine whether there were proper and done according to proper engineering practices. if that was not designed properly, how can you proceed to the next stage? if we do not design it properly, how can you determine lowered ratings on the bridge? a one andcounting on -- one inch thick gussett plate, and there were 8 on that bridge,
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and if any one fails, you cannot calculate a proper load rating in a real world application. is that right? >> i agree. since one of the recommendations was to look at the control quality assurance of designs when they are initially done, we are looking with the federal highway administration that we are looking at right now to ensure that what is designed as opprobrious for the design at that time based on design code. hopefully we will be able upfront to address and insure that the design is correct and then you take from the design to ensure that the fabrication is correct. once it gets out into the field and the bridge inspectors looking at that, he is looking
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at the proper the designed, properly constructed bridge for that location. >> against that backdrop, the inspector general's report says 40% of the ratings do not match information provided by the state. then we are in a dangerous zone, if you will, of bridgett use. mr. gee? >> after the ntsb reports were issued, we issued a number of technical advisor is, one of which provided guidance on how to consider and analyze gussett plates which is providing a tighter control on how inspection is done. i think the risk-based approach to compliance reviews will give a tighter definition on how states conduct load ratings and how the procedural work.
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>> i am troubled by the use of "risk-based inspection practices" because it tends to have too much reliance on paper rather than hands-on experience and vibration. risk-based safety practice in the aviation, in real -- rail, and maritime are common practices. as one faa inspector said, "you have to end the paperwork and be on the shop floor. yuo havou have to put your handn the engin." the same thing goes for bridges.
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you need your hands on at some point. >> we included a requirement that was previously an administrative policy. when we talk about ris-based, this is not substituting paper for hands-n. -- hands-on. the question comes up how frequently bridges are inspected. in europe they have a sliding scale. we are considering it carefully. >> all of this is important as we shape the bill i had intended
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to have through the house by now. the administration included, we have to get this thing right. we need a sound program for adequate numbers of inspectors, adequate design and engineering standards, adequate evaluations of existing structures, and employing all technologies available to protect this massive portfolio of bridge structures in this country $98 billion backlogged. it is immence.
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-- immense. graders' the cost of not doing it as we saw with interstate 35 west. the diversion we saw other people, goods, all of this daily is a huge cost to the economy. it is far better to make that investment in the bridge and to be right to begin with. >> we agree with that mr. chairman. one of the issues i have raised internally with our staff is an emergency shutdown of a bridge is a failure. even if it does not fall down, if we close a bridge on scheduled -- and scheduled, it is failure. we look at the management process these to see how the states that this data and then the element to come up with a process to it does appear
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problems before they reach a critical stage. >> one last comment or question. has the federal highway administration, have estates followed up on interstate 35 west or the other bridges that were designed at the same time and build with fractured a critical of bridgett structures mean that one major piece fails and the bridge fails? i understand or recall that in the advisory was sent out to have all states complete the inspection. what information have they reported back? >> we believe all states have complied. there were only a handful and bridges or found to be concerned. they have been followed up on.
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i think the findings from the ntsb, we have pushed them out so the best information is available to all states and we are working with them. >> i agree. i believe all of the bridges have been addressed. we are doing research on the gussett plates. the initial information on how we should properly look at these things is being followed up on. working with thefhwa -- fhwa, there are doing analysis at turner fairbanks so we can clearly defined for people what they need to do in that regard. >> thank you very much to all of the panelists. this will be a continuing inquiry of the committee. i apologies to my colleagues for
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proceeding at such length. as you can see, this is a matter of great passion and concern for me >> think you, mr. chair, and anytime you have questions i would be more than happy to allow for that line of questioning simply because of your background and expertise. thank you, sir. >> thank you, madam chair. mr. gee, i want to go into just a couple of other questions. earlier, you said that you do not have the authority to override a state party decision on where they spend their money. in your oversight role, if one of your inspectors came to you and told you that a bridge was very unsay for very dangerous, what would you do in response to that? you said a moment ago that there
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is only a handful of bridges that you feel are of concern and they have been followed up on, or something to that effect? what happened? >> that was on the response to the chairman park's a question about the interstate 35 west type of bridge. >> 0, just those types of bridges? >> siesta. >> that category of 400 of the -- order 61 bridges built at the same time, the mid 1960 proxy with this design in engineering. he was not speaking generally. >> but to answer your question about oversight if we are aware of and i'm sick bridge, we will go to the state and first of all make sure we have the most recent inspection report. if it needs to be shot down, we will basically forced the state to shut it down. in pr and indge
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that case the city kept a reopening it. the commonwealth would shut it down and the city would reopen it. i think we finally got the situation where it is protecting the safety of the motorists. >> earlier i mentioned that there are -- 115,000 . most of the traffic. maybe we should concentrate the funding on the high volume bridges. what i am wondering about is how many inspectors at the federal and state level are devoted to inspections? do they need to be inspected once every 24 months and was given a waiver to go longer. how many federal and state
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bridge inspectors are there? do you know? >> the federal highway administration does not on bridges, so it is on the owners. the vast majority are owned by the states. the do have a core of inspectors to resume inspection on federally owned bridges like the national park service. i do not have a count of how state urgent -- how many state bridge inspectors there are. >> in virginia, we do 10,000 bridges safety inspections per year. we have 100 people that are bridge inspectors. 20% of our inventory we use consultants to supplement their people. we spend about $22 million per year on bridge safety inspection. >> all right.
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thank you very much. >> thank you, mr. duncan. one of the things you mentioned, mr. gee, is that you look at some of the technology in europe and other areas and you're also looking outside the public sector. what about the university transportation centers. are they trying to find a solution to some of these issues? >> we work with university transportation centers. often times they have the funding for different areas of work they have identified so we try to align with their interests are to what we consider to be the national needs. we work closely with the individual centers to see what they will come up with. we use the individual university's sanders for training in getting information back to the local governments.
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>> does the department funded universities? >> yes, they do. >> you wait for them to tell you what they will look at? >> often times they will identify their area of cotton -- area of concentration that the consortium is putting forward. it is part of the research and innovative technology. >> is there a specific technology the you were looking for, do not suggest to them that they need to start looking at what can be used and then apply it? >> as part of the international scanning program, there was an implementation plan that has to be a part of the effort. they have to individually identify with the best mechanisms are to advance the technology. sometimes it may involve a
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university. >> maybe they can begin to work and look at the european methods and at least provide you with some of the information and some validity. >> none of the state d.o.t.'s you visited were able to provide a comprehensive data on total state and local investments. in the gao's work since that report, have you found any evidence that states are now better able to track and report state and local bridge spending? i would also like mr. kerley to comment on that. >> i am not aware of any change since 2008. >> we sent our budget so we know. i think and asmr. ge -- as mr. gee mentioned, we have funding a
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multiple projects. we do not have a program where we pullout what is bridges and what is in different categories. we will probably spend more than what we have to have budgeted in the bridge program that are included in other projects. >> is there a standardized tracking system that is used in the industry to be able to input information and be able to keep track of the status and funding? >> not that i'm aware of. that is what showed up in one of the reports. >> we just do not track from that viewpoint if we are using that. if we are using bridge funding, it may fall into a different category. there may be bridges that may not get picked up. it does not automatically enter a system for expenditures on bridges. it may have been included aniline segment of the road
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fund. >> with the advancing of technology and innovative software, you would think there would be something to provide at least the ability to do some of that tracking. also, you testified on the gao's previous findings that increases in federal highway funding have been accompanied by decreases in state highway spending and have recommended congress have an effort to make sure they receive the funding. mr. kerley has stated that a provision would reduce funding in an already strained time. would an moe increase spending? based on your experience, we have reason to believe that states would reduce their level of spending of required -- if required to leave federal funds on the table?
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mr. kerley or anyone who would like to comment. >> one thing we have noted over the years in based on prior work the gao has done, there has been some reduction in state spending. the key effort is that states maintain the level. with the recovery act, the maintenance level requirements included is an interesting opportunity of the head during a time of fiscal opportunity. we won them to talk about themoe experiece -- the moe nce and whether or not states have left money on the table. it would be somewhat surprising
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if states did leave the funding on the table. >> states are spending more money on their bridges. even though they transfer funding to other categories, they can still use them on a segment of their road that has bridges, but just not reporting it in that way. >> is that not to their detriment? >> it would appear to me, yes, and ma'am. if the reporting requirement was there, they would reported that particular way. they tried to manage their funds to maximize the use of all federal funds they receive. that is in the bridge program and everything else that comes
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through the program. as they shift funding around, they are probably supplementing that so the total of what they are spending is the greater than what they receive from the federal government. >> you just stated you cannot track with the state spends on bridge projects and bridge repair. if so, what was the basis for the numbers your siding and how much -- on the numbers c you areiting on how much they spend? >> i will get back with you directly on that. the amount of state money being spent, city money, and federal money. you may have shifted federal money to other programs that maybe you are not tracking the use supplements it with local or state money. we would have to get back to you. >> if you would, please, i am sure the subcommittee would love to be enlightened on that. mr. oberstar, any further
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questions or comments? >> one follow-up to the question mr. duncan raised. mr. gee, what tools has the federal highway administration used to enforce compliance? has the federal highway ever withheld state funding for noncompliance? >> it is not a matter of withholding funding as much as withholding approval on projects. we have threatened on a number of occasions, but the state -- those particular states have made the steps forward to address our concerns. in my memory, we have not withheld any approvals. >> to have not withheld approval? but that is a tool available. >> it is. we have threatened that at least twice in the last six months.
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>> threaten is good. carrying it out is more important. mr. kerley probably does not like to hear that as a practitioner on the front line of highways. the panel angive opportunity to give us your priorities for the future of bridge construction, inspection, maintenance, and oversight for the next six years of the servers transportation program. su --rface transportaiont program. -- surface transportation
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program. >> we think they need to rollout the improved oversight of the state party annual program. it needs to be data driven and have minimum standards. it needs to identify key problems and then be able to present to whether a state is in substantial compliance or not using consistent guidelines. then they need consistent guidelines for enforcing those actions. i think that would be beneficial for the health of the program and would also provide the states with consistency as well. secondly, we want them to fully implement efforts to address the nationwide bridgett safety risks. --bridge safety risks. they have identified a program for risk, but you need to link the risk with action plans.
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we are calling for more clarity on what the division offices have in order to address the high priority risks. the last point that was touched on, this problem with collecting and analyzing sufficient expenditure information. you cannot right now tell how much a state is spending on structurally deficient bridges, specifically ones that carry the bulk of the traffic. acquiring the information to do that will be hard, but if we do not start now to improve our current tools we will not meet our goal. those of the the three major things we would like to see being done, mr. chairman. >> very good. very doable and very much in line with what we were thinking in our surface transportation bill. >> first priority is to make sure we know what we have out there not in terms of the number of bridges, but where they stand
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in the structural deficiencies and how much remaining service life we have one remaining bridges so we know the size of the problem is that is coming at us so we can manage it. preservation is a huge part, asset management is a huge part to make sure we manage what we have so we can deal with the challenge in a very comprehensive, systematic, and a logical manner. oversight is an issue. we appreciate the gao and the inspector general's audits. it was secretary peters to asked them to review s. the reality is in the 1970's we had our own auditors. we set them on to the inspector general through a reorganization. we do not have the function to be built on it ourselves, but we have since created an
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improvement team that will help us improve on the managing. for some reorganization more than 10 years ago, we lost some consistency from state to state. with the new oversight process these we're trying to implement in the 2011, we will have a stronger sense of trying to regain the consistency. it will augment our risk assessment, the process that has tightened oversight will actually identify risk areas throughout the country. >> that is a very important contribution. thank you for that. >> the last point is performance management. as i noted in my testimony, the program is very much an eligibility program from our perspective. we have been monitoring bridge performance for over 20 years. it has been a process of
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encouraging the states to address the trend. we have aspirational goals for the performance, but we do not have the legal mandates to engage in an oversight role on the performance. >> you need more legal authority for that? >> i am not prepared to say that yet, but we have been working very closely to the standing committee on performance management to identify performance metrics and begin to talk about what appropriate targets may be. >> thank you. that is very helpful. mr. chairman? >> one thing we think would be useful in setting a broader framework would be to define goals, have a better understanding of the national interest is. there can be shared a vision in terms of where the program would be going, developing metrics
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that when assess success or the lack thereof with regards to bridges. for example, you may have metrics to measure change in condition which could be tied back to expenditures. some of the questions today we have been wrestling with our how much is being spent, whether we getting for that? with that kind of remark in place, that will hopefully put this in a better position when become back to look at this issue again. >> thank you. >> as a number of bridges, i would say funding, funding, and funding for the top three, sir. i will give you some other top spots. i think we need to emphasize asset management. we need to address deficient bridges. we need to think about the bridges and getting ready to fall in that category. how do we maximize the money that we already have to the most cost-effective thing we can do? we need to emphasize

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